Dear Mr. Margro:
This is in response to your March 6, 2003, letter requesting a public interest waiver of the Buy America requirements for all rolling stock in the anticipated Oakland Airport Connector Project (OAC Project) procurement by the Bay Area Rapid Transit District (BART).
Section 5323(j)(2)(C) of the Federal transit laws (49 U.S.C. 5301, et seq.) sets forth the general requirements for the procurement of rolling stock, including train control, traction power, and communications equipment. This section provides that when rolling stock is procured with FTA funds, the cost of the components and subcomponents produced in the United States must be at least 60 percent of the cost of the components of the rolling stock and must undergo final assembly in the U.S. Under 49 U.S.C. 5323(j)(2)(A) and the implementing regulations, these requirements may be waived if their application "would be inconsistent with the public interest." 49 C.F.R. 661.7(b). The regulation also notes that "[i]n determining whether the conditions exist to grant this public interest waiver, the [FTA] will consider all appropriate factors on a case-by-case basis . . . ." Id.
According to the information in your letter, this design-build solicitation will be performance-based for both the fixed facilities and rolling stock (including train control, traction power, and communications equipment). BART anticipates proposal preparation and submittal will be very costly due to the nature of the procurement. Because of the relatively small number of vehicles involved (approximately ten) and the high cost of proposal preparation, BART is concerned that without a Buy America waiver there will be no competition, as only one potential offeror has indicated it would be able to comply with the Buy America requirements for the vehicles. You assert that having only one potential offeror able to comply with Buy America is contrary to the public interest and generating competition is in the publicís interest.
FTA posted a summary of this waiver request on its website and requested comment. We received five comments, three in support and two against the issuance of the waiver. The comments in support of the waiver were from Siemens Transportation Systems, CAPTech, Inc., and Hans Korve, Korve Engineering. Siemens, a potential offeror, argued that rolling stock sub-systems are available from various suppliers; however, the technologies have been tested and integrated to ensure safety and reliability.
Substitution of a new subsystem would adversely impact the proven safety features of these systems. Siemens also argued that a waiver would allow BART the most cost-effective utilization of the available, limited, funding. Hans Korve, a member of the Transportation Committee of the Oakland Chamber, commented that the waiver would allow BART to expedite this project while saving money. CAPtech, Inc. argued that opening up the American market to foreign vendors would ultimately force American vendors to produce a better product.
The comments against the waiver were from IMPulse NC, Inc., and Bombardier Transportation. IMPulse NC, Inc., is a U.S. manufacturer of wayside traction power equipment and confirmed a great interest in the opportunity to provide an offer to manufacture and supply compliant products. Bombardier argued that as an offeror able to comply with Buy America, they have made a significant investment in the U.S. that enables them to comply, and a waiver would undermine this investment. They suggest that other potential offerors have U.S. facilities and, therefore, could in fact comply with the requirements. They also note that provisions in the Best Practices Procurement Manual ensure competitive bidding.
As noted in our Dear Colleague letter issued June 10, 2002, FTA vigorously enforces Buy America. In order to do this, we must account for the adjustments made by the rolling stock industry to comply with the Buy America requirements and enforce those requirements to ensure that the industry is not disadvantaged by such adjustments. After careful consideration, FTA finds that it would not be in the public interest to grant a waiver in order to generate foreign competition for this procurement. First, it is too soon to determine whether or not there will be domestic competition in this procurement. Second, if there is not competition, the provisions for price and cost analysis, and the opportunity to negotiate price with that sole offeror, should ensure BART a fair price. And third, a waiver would encourage offerors to submit proposals incorporating foreign-manufactured rolling stock, despite the possibility that these offerors may have the capacity to offer compliant rolling stock.
If you have any questions, please contact Meghan Ludtke at (202) 366-1936.
Very truly yours,
Gregory B. McBride
Deputy Chief Counsel
cc: Leslie Rogers, Regional Administrator